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| In China, Antitrust Adviser Is Ousted in Qualcomm Inquiry | |
| (about 2 hours later) | |
| HONG KONG — An adviser to a Chinese government antitrust committee has been dismissed for accepting payments from Qualcomm, the American technology company under investigation in China for potential antitrust violations, Chinese state news reports said on Wednesday. | HONG KONG — An adviser to a Chinese government antitrust committee has been dismissed for accepting payments from Qualcomm, the American technology company under investigation in China for potential antitrust violations, Chinese state news reports said on Wednesday. |
| Qualcomm is one of dozens of multinational companies under pressure in China recently as regulators have deepened enforcement of antimonopoly legislation, which also covers cases of illegal pricing. Foreign carmakers, including General Motors, the Audi unit of Volkswagen and Daimler have come under scrutiny in recent weeks over auto parts, while antitrust investigators raided Microsoft’s China offices twice in the past two weeks. | Qualcomm is one of dozens of multinational companies under pressure in China recently as regulators have deepened enforcement of antimonopoly legislation, which also covers cases of illegal pricing. Foreign carmakers, including General Motors, the Audi unit of Volkswagen and Daimler have come under scrutiny in recent weeks over auto parts, while antitrust investigators raided Microsoft’s China offices twice in the past two weeks. |
| Qualcomm, which sells wireless technology and is one of the world’s biggest chip makers, has been the subject of an antitrust investigation in China since late last year related to patent licensing and pricing of smartphone chips. The reports of allegations against the adviser do not accuse Qualcomm of breaching any rules by hiring him, but may complicate the company’s efforts to defuse an investigation. | Qualcomm, which sells wireless technology and is one of the world’s biggest chip makers, has been the subject of an antitrust investigation in China since late last year related to patent licensing and pricing of smartphone chips. The reports of allegations against the adviser do not accuse Qualcomm of breaching any rules by hiring him, but may complicate the company’s efforts to defuse an investigation. |
| The allegations published by Chinese state media outlets on Wednesday said the company had made “large payments” to Zhang Xinzhu, an economist at the Chinese Academy of Social Sciences, while he also served as an adviser on an antimonopoly committee under the State Council, or China’s cabinet. | The allegations published by Chinese state media outlets on Wednesday said the company had made “large payments” to Zhang Xinzhu, an economist at the Chinese Academy of Social Sciences, while he also served as an adviser on an antimonopoly committee under the State Council, or China’s cabinet. |
| At issue appears to be a study Mr. Zhang co-wrote on Qualcomm’s pricing of licenses. Qualcomm submitted a copy of the report in May to the National Development and Reform Commission, the powerful economic planning agency that is one of three Chinese government departments charged with enforcing antitrust law in the country. | At issue appears to be a study Mr. Zhang co-wrote on Qualcomm’s pricing of licenses. Qualcomm submitted a copy of the report in May to the National Development and Reform Commission, the powerful economic planning agency that is one of three Chinese government departments charged with enforcing antitrust law in the country. |
| The Commission has been investigating Qualcomm, and last month an official told China Daily, a state-run newspaper, that “the investigation is nearly concluded and the result will be announced soon.” A report in the government-run China News Service on Wednesday, quoting an unidentified person, said that “Qualcomm hoped to use this report, coming with the endorsement of a member of an official expert group, to show that the Chinese investigative agencies were at odds with each other.” | The Commission has been investigating Qualcomm, and last month an official told China Daily, a state-run newspaper, that “the investigation is nearly concluded and the result will be announced soon.” A report in the government-run China News Service on Wednesday, quoting an unidentified person, said that “Qualcomm hoped to use this report, coming with the endorsement of a member of an official expert group, to show that the Chinese investigative agencies were at odds with each other.” |
| It was unclear why it took China’s cabinet three months to act on any potential conflict of interest on Mr. Zhang’s part, or whether the extent of the financial relationship between Mr. Zhang and Qualcomm had been disclosed. | It was unclear why it took China’s cabinet three months to act on any potential conflict of interest on Mr. Zhang’s part, or whether the extent of the financial relationship between Mr. Zhang and Qualcomm had been disclosed. |
| Mr. Zhang, who previously co-wrote academic research with acknowledged support from Qualcomm, was recently dismissed from the State Council advisory group. Contacted on Wednesday, Mr. Zhang declined to comment beyond an emailed reply: “I can only keep silent, the atmosphere of opinion is too vicious right now.” | Mr. Zhang, who previously co-wrote academic research with acknowledged support from Qualcomm, was recently dismissed from the State Council advisory group. Contacted on Wednesday, Mr. Zhang declined to comment beyond an emailed reply: “I can only keep silent, the atmosphere of opinion is too vicious right now.” |
| Representatives at Qualcomm in Beijing did not respond to voice messages and an email seeking comment. The company’s headquarters in San Diego also did not respond to emails after hours Wednesday that sought comment on the company’s relationship with Mr. Zhang. The National Development and Reform Commission responded to phone calls by requesting faxed questions, to which it did not reply. | Representatives at Qualcomm in Beijing did not respond to voice messages and an email seeking comment. The company’s headquarters in San Diego also did not respond to emails after hours Wednesday that sought comment on the company’s relationship with Mr. Zhang. The National Development and Reform Commission responded to phone calls by requesting faxed questions, to which it did not reply. |
| In an interview published Tuesday in The Paper, a Chinese news website, Mr. Zhang said he had been dismissed from the State Council committee for “speaking out for foreign businesses.” | In an interview published Tuesday in The Paper, a Chinese news website, Mr. Zhang said he had been dismissed from the State Council committee for “speaking out for foreign businesses.” |
| “It’s like I was acting as the defense for a criminal under death penalty,” he said. “Any case has its two sides, pro and contra, and it can’t be that there’s not even the right to speak up.” | “It’s like I was acting as the defense for a criminal under death penalty,” he said. “Any case has its two sides, pro and contra, and it can’t be that there’s not even the right to speak up.” |
| China’s antimonopoly law is designed to protect consumers from price gouging and other abuses, but foreign companies fear that the authorities could use it to single them out in an effort to bolster domestic companies or respond to political directives. | China’s antimonopoly law is designed to protect consumers from price gouging and other abuses, but foreign companies fear that the authorities could use it to single them out in an effort to bolster domestic companies or respond to political directives. |
| Foreign companies often lack the political patronage enjoyed by local firms, especially state-owned ones, and can have little recourse. In a statement on Wednesday, the European Chamber of Commerce in China said it had “received numerous alarming anecdotal accounts from a number of sectors that administrative intimidation tactics are being used to impel companies to accept punishments and remedies without full hearings.” | Foreign companies often lack the political patronage enjoyed by local firms, especially state-owned ones, and can have little recourse. In a statement on Wednesday, the European Chamber of Commerce in China said it had “received numerous alarming anecdotal accounts from a number of sectors that administrative intimidation tactics are being used to impel companies to accept punishments and remedies without full hearings.” |
| “Practices such as informing companies not to challenge the investigations, bring lawyers to hearings or involve their respective governments or chambers of commerce are contrary to best practices,” the statement said. | “Practices such as informing companies not to challenge the investigations, bring lawyers to hearings or involve their respective governments or chambers of commerce are contrary to best practices,” the statement said. |
| Still, both foreign and domestic companies have been targeted in the past year, including manufacturers of infant milk formula, liquor distillers, drug companies and a food packaging business. | Still, both foreign and domestic companies have been targeted in the past year, including manufacturers of infant milk formula, liquor distillers, drug companies and a food packaging business. |
| When it comes to foreign technology providers, the government has shown an added layer of wariness that has deepened over the past year, especially after Edward J. Snowden’s disclosures about surveillance by the United States. | When it comes to foreign technology providers, the government has shown an added layer of wariness that has deepened over the past year, especially after Edward J. Snowden’s disclosures about surveillance by the United States. |
| “With tech, China has a clearly and consistently stated goal: Reduce dependence on foreign companies,” said Adam Segal, the director of the program on digital and cyberspace policy at the Council on Foreign Relations in New York. “The antimonopoly investigations are one tool in a shifting set that Chinese policy makers can use to pressure foreign companies. But they also still need the companies.” | “With tech, China has a clearly and consistently stated goal: Reduce dependence on foreign companies,” said Adam Segal, the director of the program on digital and cyberspace policy at the Council on Foreign Relations in New York. “The antimonopoly investigations are one tool in a shifting set that Chinese policy makers can use to pressure foreign companies. But they also still need the companies.” |
| Qualcomm established a presence in China in 1999 and by last year had grown to rely on the country for nearly half its total revenue. But business has slumped in China recently because of lower device sales and the underreporting of sales, which hurts the company’s licensing revenue. In an earnings conference call last month, Qualcomm said this situation would most likely affect its 2014 results and projected an 8 percent reduction in sales in the second half of the year. | Qualcomm established a presence in China in 1999 and by last year had grown to rely on the country for nearly half its total revenue. But business has slumped in China recently because of lower device sales and the underreporting of sales, which hurts the company’s licensing revenue. In an earnings conference call last month, Qualcomm said this situation would most likely affect its 2014 results and projected an 8 percent reduction in sales in the second half of the year. |
| A day after the earnings call, Qualcomm announced that its venture investment arm had committed to invest up to $150 million in Chinese start-up companies, focusing on firms developing mobile technologies. | A day after the earnings call, Qualcomm announced that its venture investment arm had committed to invest up to $150 million in Chinese start-up companies, focusing on firms developing mobile technologies. |
| Qualcomm’s president, Derek Aberle, last month made his third recent visit to China to discuss the antitrust investigation with representatives of the National Development and Reform Commission. “This is a large priority for the company to resolve,” Mr. Aberle said on the conference call last month. “We are actively engaged with the N.D.R.C. to try and get it resolved as expeditiously as possible.” | Qualcomm’s president, Derek Aberle, last month made his third recent visit to China to discuss the antitrust investigation with representatives of the National Development and Reform Commission. “This is a large priority for the company to resolve,” Mr. Aberle said on the conference call last month. “We are actively engaged with the N.D.R.C. to try and get it resolved as expeditiously as possible.” |
| According to the report in The Paper, Mr. Zhang was highly critical, saying the chief problems are “enforcement exceeding powers and unprofessional enforcement.” Mr. Zhang said, “Currently, China’s administrative law enforcement is extremely dangerous, with investigative powers and law enforcement powers bound together.” He added, “From the viewpoint of administrative enforcement of the law, China’s antimonopoly law is at a dead end.” | According to the report in The Paper, Mr. Zhang was highly critical, saying the chief problems are “enforcement exceeding powers and unprofessional enforcement.” Mr. Zhang said, “Currently, China’s administrative law enforcement is extremely dangerous, with investigative powers and law enforcement powers bound together.” He added, “From the viewpoint of administrative enforcement of the law, China’s antimonopoly law is at a dead end.” |